Comovement of Commodity Prices

percent. Besides the magnitude, the price rise was remarkable for the broad range of commodities affected; prices of agriculture commodities, energy, and metals all rose and fell together. These dramatic developments coincided with the rise of commodities as an asset class. In this paper, I study the causal links between the increase in comovement between commodity prices and this financialization of the commodities futures market. I extract common factors from a group of 41 commodities using the PANIC method and include it in a factor-augment VEC model along with a proxy of financialization. Results from the empirical analysis show that financialization of the commodities futures markets led to the recent rise in comovement between commodity prices